The company has earned (but not recorded) $6,000 of interest relating to an investment for the year ended December 31,2014.A check for this amount will be received on January 9,2015.How would the company record the related adjusting entry dated December 31,2014?
A)Debit Cash for $6,000 and credit Interest Revenue for $6,000.
B)Debit Interest Receivable for $6,000 and credit Interest Revenue for $6,000.
C)Debit Interest Expense for $6,000 and credit Interest Revenue for $6,000.
D)Debit Cash for $6,000 and credit Interest Receivable for $6,000.
E)Debit Interest Revenue for $6,000 and credit Income Summary for $6,000.

Question

Quizplus · Accepted Answer

The company has earned (but not yet received) $6,000 of interest revenue for the year ended December 31, 2014. Therefore, the company should debit Interest Receivable (an asset account) for $6,000 to reflect the amount of interest revenue that has been earned but not yet received. Additionally, the company should credit Interest Revenue (a revenue account) for $6,000 to recognize the revenue that has been earned. This adjusting entry ensures that the company's financial statements reflect the accurate amount of revenue earned and assets owed as of December 31, 2014. Option A is not correct because cash has not been received yet. Option C is not correct because it assumes that the company incurred interest expense, which is not mentioned in the question. Option D is not correct because the company has not received cash yet. Option E is not correct because there is no Income Summary account mentioned in the question.

The Company Has Earned (But Not Recorded) $6,000 of Interest